Finally I located an authoritative magazine that expresses my concerns on the validity of research broadcast in Channels dedicated to stock market.
I confess I do not understand why people buy stocks touted by pundits on stock shows. The only people who are believed to actually consistently beat the market are a handful of managers like Warren Buffett, who quietly amass companies and mint money off of them. They do this by,
first being freakily brilliant, and
second, spending virtually every waking hour thinking about companies, and
third, never giving their finds away to strangers for free.
If you are not one of these extreme outliers (and if you’re reading this blog, odds are you aren’t), you would almost certainly be better served by flipping off the stock show and sticking your money in index funds. Certainly, it’s safe to assume that free stock tips are probably worth what you pay for them.
6 replies on “hot tips”
You are right, people should not buy stocks touted by pundits on the stock shows. A few days ago, somebody told me about this guy who sells the stocks he seems to be bullish about on TV. CNBCTv18 although asks for disclaimer by the paticipants, still I am not sure, if there are no vested interests playing there.
actually there often is a vested interest… best thing is… the pundits buy the stock, then release their advice so everybody buys it… as a result the price shoots up and they make quick buck.
Thanks for dropping by, pegasus. On the dot about big money. will return to read.
Index funds are a cop-out. They are too diversified – you get a lot of chaff in there with the wheat. (Mutual funds are worse because they charge fees on top of that).
If you want to create a buy-and-forget portfolio, then buy a few dividend stocks in industries fundamentally important to the economy (5-10 is plenty) and arrange to have the dividends re-invested – DRIPs (dividend re-investment plans) are ideal. The selected stocks should have a history of regularly increasing their dividends. The current yield doesn’t have to be all that high now if the company is financially strong and consistently raises its dividend. The yield on the original investment will grow with the periodic increases, and/or the stock price will rise because of the increases.
Industries representation you want are energy/resources, utility, bank, pharma, consumer goods, and any other leader in another industry that has a history of raising dividends.
Once you’ve done your initial selection, you don’t have to do anything more than invest new money now and then in the existing stocks. (This you can also do in your DRIP account and avoid transaction costs). That’s about as simple as it gets, and of course applies to long-term investing.
I read some years ago that one of the great old-money American families, I think it was a Rockefellers, simply had all their money invested in the same 10 Dow stocks – that was it – and they just kept on getting richer and richer for it.
If you’re interested, I’m also blogging on the markets (with a strong renewable energy theme) at http:/stockadventures.wordpress.com/.
thanks george for these golden words.
I totally agree that often Mutual funds prove to be too diversified…. index funds are good only if you are dead sure that the markets are temporarily down.
dividents… most technology companies often do not give any… so I often look at revenue growth (not profits/dividends) while taking an investment decision.
finally I believe that stock market is all about purchasing a dollar at 60 cents…. if the acquisition cost is low… profits will definitely follow.
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